Overview

Title

To amend the Mineral Leasing Act to make certain adjustments to the royalty rates for leases for oil and gas extraction on Federal land, and for other purposes.

ELI5 AI

The bill wants to change the rules about how much money companies pay to dig for oil and gas on land owned by the government. It suggests making it cheaper for companies, but this might mean less money for things the government pays for, like schools and roads.

Summary AI

The bill, H. R. 9017, proposes changes to the Mineral Leasing Act to adjust the royalty rates for oil and gas leases on federal land. It suggests reducing the royalty rates from 16⅔% to 12½% and lowering the minimum bid and rental rates for oil and gas leases. Additionally, the bill eliminates fees for expressions of interest in such leases and introduces noncompetitive leasing options under specific conditions. These adjustments aim to reform the framework for leasing federal lands for energy production and address economic challenges in the oil and gas industry.

Published

2024-07-11
Congress: 118
Session: 2
Chamber: HOUSE
Status: Introduced in House
Date: 2024-07-11
Package ID: BILLS-118hr9017ih

Keywords AI

mineral leasing act royalty rates federal land oil and gas leases noncompetitive leasing rental rates minimum bid energy production government revenue public resource management

Sources

Bill Statistics

Size

Sections:
2
Words:
3,053
Pages:
13
Sentences:
31

Language

Nouns: 769
Verbs: 226
Adjectives: 151
Adverbs: 49
Numbers: 151
Entities: 104

Complexity

Average Token Length:
3.86
Average Sentence Length:
98.48
Token Entropy:
5.14
Readability (ARI):
49.56

AnalysisAI

To amend the Mineral Leasing Act to make certain adjustments to the royalty rates for leases for oil and gas extraction on Federal land, and for other purposes, the “Declaration of Energy Independence Act” introduces several changes that could significantly affect how oil and gas are leased from federal lands in the United States. Proposed on July 11, 2024, by various members of the U.S. House of Representatives, the bill aims to modify existing regulations to lower royalty rates, bidding requirements, and fees associated with federal land leases. This commentary aims to unpack the complexities within the bill, highlight key issues, and explore potential impacts on the public and stakeholders.

General Summary of the Bill

The bill proposes to amend the Mineral Leasing Act with several key changes. Firstly, it aims to lower the onshore oil and gas royalty rates from 16⅔ percent to 12½ percent. Secondly, it intends to reduce the minimum bid per acre for oil and gas leases from $10 to $2, and similarly adjusts rental rates. Furthermore, it seeks to eliminate fees for expressions of interest in leasing opportunities and adjust conditions for noncompetitive leasing. The bill also introduces significant changes in managing leases on formerly abandoned mining claims and allows the Secretary of the Interior to reduce royalty fees under specific circumstances.

Significant Issues

Several issues arise from the proposed amendments:

  1. Reduction in Royalty Rates: The reduction in oil and gas royalty rates (from 16⅔ percent to 12½ percent) may lead to decreased government revenue. This change lacks clear justification and could significantly impact funding for public services.

  2. Decrease in Minimum Bids and Rental Rates: By lowering the minimum bids from $10 to $2 per acre and similarly decreasing rental rates, the proposed amendments might invite inefficient land use and favor particular bidders without a robust economic analysis supporting such changes.

  3. Elimination of Expression of Interest Fees: Removing fees for expressions of interest might encourage speculative land claims, potentially wasting government resources and reducing fiscal responsibility.

  4. Noncompetitive Leasing Conditions: The bill allows for noncompetitive leasing under specific generous terms, potentially reducing market competition and favoring certain entities.

  5. Complex and Technical Language: The bill's language is highly technical, making it challenging for the public and many stakeholders to comprehend without expert assistance.

Potential Public Impact

Broadly speaking, the reduction in royalty rates and lease fees could impact public finances by decreasing funds available for essential services provided by the government. Lower revenue from federal land leases may result in reduced funding for public education, infrastructure, or healthcare services, thus impacting the broader public.

Impact on Specific Stakeholders

The proposed changes could have varying impacts on different stakeholders:

  • Oil and Gas Companies: These entities might benefit from reduced financial burdens due to lower royalties and fees, potentially encouraging increased oil and gas extraction activities on federal lands.

  • Environmental Advocates and Conservationists: Such groups may see the reduced fees and noncompetitive leasing as detrimental, potentially encouraging less responsible land use and extraction practices.

  • Government and Public Institutions: The decrease in potential revenue from federal lands may disadvantage public institutions reliant on these funds for diverse programs and services.

  • Local Communities: Those living in areas with high federal land leasing might experience increased economic activity from oil and gas companies but could also face potential environmental and infrastructural changes.

In conclusion, while the “Declaration of Energy Independence Act” intends to adjust financial obligations for oil and gas extraction on federal lands, the lack of clear justifications for its proposed reductions and complex technical amendments raises significant concerns. Careful consideration and further analysis are crucial to understanding the long-term impacts of this bill on public finances, market competition, environmental stewardship, and diverse stakeholder interests.

Financial Assessment

The proposed bill, H. R. 9017, endeavors to adjust various financial aspects concerning the leasing of federal lands for oil and gas extraction. These adjustments are primarily centered around reducing certain fees and royalties, potentially affecting government revenue and public interest.

Reduction in Royalty Rates

One of the notable changes in the bill is the reduction of the royalty rate for oil and gas leasing on federal lands from 16⅔% to 12½%. This decrease could lead to a substantial reduction in government revenue collected from these leases. Such funds typically contribute to public services and infrastructure, and a cut in royalty rates might lower the financial resources available for these essential services. The issue raised regarding this measure notes that there is no clear justification provided for such a significant reduction, which raises concerns about its potential impact on the budget and public funds.

Changes to Bid and Rental Fees

The bill proposes lowering the minimum bid for oil and gas leases from $10 per acre to $2 per acre. This reduction might make the land more accessible to bidders but could also result in inefficient land use and a possible decrease in overall bids, reducing the potential revenue for taxpayers. Critics have pointed out that this change may favor certain bidders without a thorough economic analysis, hence disadvantaging taxpayers who ultimately rely on governmental income from leases.

Similarly, the rental rates for these leases are adjusted, where the annual rental starts at $1.50 per acre for the first five years and increases to $2 per acre subsequently. This is a reduction from the previous setup of $3 per acre per year, scaling to $15 per acre per year. Such decreases in rental and bid amounts could result in a significant loss of funds that typically support government initiatives and local economies reliant on this revenue stream.

Fee Elimination and Noncompetitive Leasing

The elimination of fees for expressions of interest in leasing plots is another financial adjustment in the bill. While removing such fees could simplify the process for interested parties, it may also encourage speculative land claims. These speculative claims could clog the system, expending governmental resources aimed at managing these processes efficiently. There is concern noted that removing these fees might reduce fiscal responsibility and oversight.

Furthermore, the inclusion of noncompetitive leasing options, though providing flexibility, might favor specific entities, potentially compromising the advantages of a competitive market. This change, along with the complex conditions outlined for noncompetitive leasing, could lead to administrative challenges and concerns over favoritism, which are crucial points highlighted in the issues section.

Conclusion

H. R. 9017 presents several financial adjustments, primarily reducing fees, bids, and royalty rates associated with oil and gas leases on federal lands. The potential consequences of these adjustments include reduced government revenue and increased complexity in managing leases. These financial shifts are major concerns due to their possible long-term effects on public resources and the integrity of resource management. There is also a noted lack of transparency and justification for these amendments, raising questions about their broader impact on national and public interests.

Issues

  • The amendment in Section 2(a)(1)(A) that reduces onshore oil and gas royalty rates from '16⅔ percent' to '12½ percent', which could significantly decrease government revenue and lacks clear justification. This change may lead to reduced public funds for essential services.

  • The proposed reduction of the minimum bid per acre for oil and gas leasing from '$10' to '$2' as outlined in Section 2(b)(1) and 2(b)(2) could lead to inefficient land use and may favor certain bidders without comprehensive economic analysis, potentially disadvantaging taxpayers.

  • The change in fossil fuel rental rates in Section 2(c)(1), which reduces rental fees from '$3 per acre per year, increasing to $15 per acre per year' to '$1.50 per acre per year for the first through fifth years and $2 per acre per year thereafter', might result in a significant loss of revenue for the government without a clear rationale.

  • Removal of fees for expressions of interest in Section 2(d) could encourage speculative land claims without requiring any commitment, thereby potentially wasting government administrative resources and reducing fiscal responsibility.

  • Section 2(e)(3) allows for noncompetitive leasing under certain conditions, potentially favoring specific entities and reducing the benefits of competitive markets, with little to no justification provided.

  • The highly technical and complex language used throughout the amendments, as noted in multiple sections, makes it difficult for stakeholders and the general public to understand the changes without expert assistance, potentially limiting informed public discourse.

  • There is a lack of transparency and justification for the significant changes to fee, bid, and royalty structures, raising concerns about their long-term impacts on public and national interests, as highlighted in Sections 2(a), 2(b), and 2(e).

  • The amendments regarding noncompetitive leasing conditions for pre-vested mineral interests as mentioned in Section 2(e) add complexity, which could result in administrative burdens and potential favoritism, undermining the integrity of public resource management.

Sections

Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.

1. Short title Read Opens in new tab

Summary AI

The first section of the act states that it can be referred to as the “Declaration of Energy Independence Act.”

2. Amendments to Mineral Leasing Act Read Opens in new tab

Summary AI

The amendments to the Mineral Leasing Act include changing the royalty rates for oil and gas leases, adjusting the conditions for reinstatement and bids for onshore leases, and eliminating some fees. Additionally, it modifies rules for leasing lands under certain conditions, outlines requirements for leases on abandoned mining claims, and provides the Secretary of the Interior authority to reduce royalties under specific circumstances.

Money References

  • — (1) LEASE OF OIL AND GAS LAND.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended— (A) by striking “162⁄3 percent” each place it appears and inserting “121⁄2 percent”; and (B) in subsection (b)(1)(A), by striking “or, in the case of” and all that follows through “removed or sold from the lease”. (2) CONDITIONS FOR REINSTATEMENT.—Section 31(e)(3) of the Mineral Leasing Act (30 U.S.C. 188(e)(3)) is amended by striking “20” each place it appears and inserting “16⅔”. (b) Oil and gas minimum bid.—Section 17(b) of the Mineral Leasing Act (30 U.S.C. 226(b)) is amended— (1) in paragraph (1)(B), by striking “$10 per acre during the 10-year period beginning on the date of enactment of the Act titled ‘An Act to provide for reconciliation pursuant to title II of S. Con. Res. 14’” and inserting “$2 per acre for a period of 2 years from the date of enactment of the Federal Onshore Oil and Gas Leasing Reform Act of 1987”; and (2) in paragraph (2)(C), by striking “$10 per acre” and inserting “$2 per acre”. (c) Fossil fuel rental rates.
  • (1) ANNUAL RENTALS.—Section 17(d) of the Mineral Leasing Act (30 U.S.C. 226(d)) is amended by striking “than $3 per acre per year” and all that follows through “and $15 per acre per year thereafter” and inserting “than $1.50 per acre per year for the first through fifth years of the lease and not less than $2 per acre per year for each year thereafter”.
  • (2) RENTALS IN REINSTATED LEASES.—Section 31(e)(2) of the Mineral Leasing Act (30 U.S.C. 188(e)(2)) is amended by striking “$20” and inserting “$10”. (d) Elimination of fee for expression of interest.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended by striking subsection (q). (e) Noncompetitive Leasing.—Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended— (1) in subsection (b)— (A) in paragraph (1)(A)— (i) by striking “paragraph (2)” and inserting “paragraphs (2) and (3) of this subsection”; and (ii) by inserting “Lands for which no bids are received or for which the highest bid is less than the national minimum acceptable bid shall be offered promptly within 30 days for leasing under subsection (c) of this section and shall remain available for leasing for a period of 2 years after the competitive lease sale.” after the period at the end; and (B) by adding at the end the following: “(3)(A) If the United States held a vested future interest in a mineral estate that, immediately prior to becoming a vested present interest, was subject to a lease under which oil or gas was being produced, or had a well capable of producing, in paying quantities at an annual average production volume per well per day of either not more than 15 barrels per day of oil or condensate, or not more than 60,000 cubic feet of gas, the holder of the lease may elect to continue the lease as a noncompetitive lease under subsection (c)(1).
  • “(E) This paragraph shall apply only to those lands under the administration of the Secretary of Agriculture where the United States acquired an interest in such lands pursuant to the Act of March 1, 1911 (36 Stat. 961 and following).”; (2) by striking subsection (c) and inserting the following: “(c)(1) If the lands to be leased are not leased under subsection (b)(1) of this section or are not subject to competitive leasing under subsection (b)(2) of this section, the person first making application for the lease who is qualified to hold a lease under this Act shall be entitled to a lease of such lands without competitive bidding, upon payment of a non-refundable application fee of at least $75.
  • (f) Conforming amendments.—Section 31 of the Mineral Leasing Act (30 U.S.C. 188) is amended— (1) in subsection (d)(1), by inserting “or section 17(c) of this Act” after “pursuant to section 17(b)”; (2) in subsection (e)— (A) in paragraph (2)— (i) by inserting “either” after “rentals and”; and (ii) by inserting “or the inclusion in a reinstated lease issued pursuant to the provisions of section 17(c) of this Act of a requirement that future rentals shall be at a rate not less than $5 per acre per year, all” after “per acre per year,”; and (B) in paragraph (3)— (i) by striking “(3) payment” and inserting the following: “(3)(A) payment”; and (ii) by adding at the end the following: “(B) payment of back royalties and inclusion in a reinstated lease issued pursuant to the provisions of section 17(c) of this Act of a requirement for future royalties at a rate not less than 16⅔ percent: Provided, That royalty on such reinstated lease shall be paid on all production removed or sold from such lease subsequent to the cancellation or termination of the original lease; and”; (3) by redesignating subsections (f) through (i) as subsections (g) through (j), respectively; (4) by inserting after subsection (e) the following: “(f) Where an unpatented oil placer mining claim validly located prior to February 24, 1920, which has been or is currently producing or is capable of producing oil or gas, has been or is hereafter deemed conclusively abandoned for failure to file timely the required instruments or copies of instruments required by section 314 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1744), and it is shown to the satisfaction of the Secretary that such failure was inadvertent, justifiable, or not due to lack of reasonable diligence on the part of the owner, the Secretary may issue, for the lands covered by the abandoned unpatented oil placer mining claim, a noncompetitive oil and gas lease, consistent with the provisions of section 17(e) of this Act, to be effective from the statutory date the claim was deemed conclusively abandoned. Issuance of such a lease shall be conditioned upon: “(1) a petition for issuance of a noncompetitive oil and gas lease, together with the required rental and royalty, including back rental and royalty accruing from the statutory date of abandonment of the oil placer mining claim, being filed with the Secretary— “(A) with respect to any claim deemed conclusively abandoned on or before the date of enactment of the Federal Oil and Gas Royalty Management Act of 1982, on or before the one hundred and twentieth day after such date of enactment, or “(B) with respect to any claim deemed conclusively abandoned after such date of enactment, on or before the one hundred and twentieth day after final notification by the Secretary or a court of competent jurisdiction of the determination of the abandonment of the oil placer mining claim; “(2) a valid lease not having been issued affecting any of the lands covered by the abandoned oil placer mining claim prior to the filing of such petition: Provided, however, That after the filing of a petition for issuance of a lease under this subsection, the Secretary shall not issue any new lease affecting any of the lands covered by such abandoned oil placer mining claim for a reasonable period, as determined in accordance with regulations issued by him; “(3) a requirement in the lease for payment of rental, including back rentals accruing from the statutory date of abandonment of the oil placer mining claim, of not less than $5 per acre per year; “(4) a requirement in the lease for payment of royalty on production removed or sold from the oil placer mining claim, including all royalty on production made subsequent to the statutory date the claim was deemed conclusively abandoned, of not less than 121⁄2 percent; and “(5) compliance with the notice and reimbursement of costs provisions of paragraph (4) of subsection (e) but addressed to the petition covering the conversion of an abandoned unpatented oil placer mining claim to a noncompetitive oil and gas lease.”; (5) in subsection (g) (as so redesignated)— (A) in paragraph (1), by striking “in the same manner as the original lease issued pursuant to section 17” and inserting “as a competitive or a noncompetitive oil and gas lease in the same manner as the original lease issued pursuant to section 17(b) or 17(c) of this Act”; (B) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively; (C) by inserting after paragraph (1) the following: “(2) Except as otherwise provided in this section, the issuance of a lease in lieu of an abandoned patented oil placer mining claim shall be treated as a noncompetitive oil and gas lease issued pursuant to section 17(c) of this Act.”; and (D) in paragraph (3) (as so redesignated), by inserting “applicable to leases issued under subsection 17(c) of this Act (30 U.S.C. 226(c))” after “this section,”; (6) in subsection (h) (as so redesignated), by striking “subsection (d)” and inserting “subsections (d) and (f) of this section”; and (7) by striking subsection (i) (as so redesignated) and inserting the following: “(i)(1) In acting on a petition to issue a noncompetitive oil and gas lease, under subsection (f) of this section or in response to a request filed after issuance of such a lease, or both, the Secretary is authorized to reduce the royalty on such lease if in his judgment it is equitable to do so or the circumstances warrant such relief due to uneconomic or other circumstances